Wasteful Spending by Hospitals Increased Under Obamacare

The Swine Line is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

July 24, 2017 - 13:26 — Elizabeth Wright

In 1998, Citizens Against Government Waste released “Are You Getting Your Money’s Worth from Nonprofit Hospitals?” which analyzed the level of charity care nonprofit hospitals were providing to their local communities as a requirement under their tax exemptions. The report found that for-profit and nonprofit hospitals are not much different in terms of the charity they provide to their respective communities. The only difference is that taxpayers are subsidizing the nonprofits.

Not much has changed in the last 19 years, according to a July 17, 2017 Politico report, “How Hospitals Got Richer Off Obamacare.” The analysis revealed how hospitals have not only been making money off the ACA, but are pocketing savings that are supposed to be passed onto consumers, burdening taxpayers and patients across the country. The investigation found that:

Seven of the nation’s top hospitals collected nearly $34 billion in operating revenue in 2015, up from $29.4 billion in 2013, before the ACA was fully implemented;

During the same period, the combined hospitals’ charity care (free treatment for low-income patients), declined from $414 million in 2013, to $272 million in 2015, a decline of 34 percent;

Bigger profits haven’t necessarily found hospitals helping their community, but instead have often led to multi-million dollar renovations, big-ticket spending items that don’t benefit near-by residents, and increased executive compensation; and

The Federation of American Hospitals, which represents for-profit hospitals, produced evidence showing its members not only paid taxes, but also provided as much charity care as not-for-profit hospitals.

Nonprofit hospitals are clearly taking advantage of tax breaks to cushion themselves with extra income, and this practice has become more pronounced under Obamacare. This is a good deal for them, but it is a misuse of funds costing American taxpayers millions of dollars that are supposed to be used for patient care.

According to Politico, “hospitals justify the billions of dollars they receive in federal and state tax breaks through a nearly 50-year-old federal regulation that simply asks them to prove they’re serving the community.” With the steady reduction of charity care, it seems dubious that these hospitals are serving their communities the way this regulation intended. They are also raising fees and ignoring calls for more transparency on their charity care, which hurts low-income patients, the community that needs them the most.

If the new administration and Congress are looking for ways to move forward with commonsense and forward-thinking healthcare reform, they need to take a closer look at hospitals and the factors that drive-up earnings, while lowering charity care.

It is time to start thinking about proactive and tangible solutions to help Americans get control of their healthcare and hold cost drivers like hospitals accountable. Shining a light on how hospitals profited from the ACA won’t fix the healthcare system, but is a start towards putting patients first. Congress and Health and Human Services Secretary Tom Price should adopt policies that make healthcare everything it isn’t under the ACA: affordable, accessible and a smart use of taxpayer dollars.